David Crow focused on product design, customer development and go-to-market implementation on $0. He is available as a consultant. He is a mentor at UW VeloCity, Jolt and FounderFuel. Follow him on Twitter @davidcrow or at DavidCrow.ca

Compared to others

I’m reading Michael Cusumano’s Dealing with the Venture Capital Crisis in the October 2009 issue of Communications of the ACM, I’m struck by the idea that our geographical proximity to the US, advanced economy, good universities and strong intellectual property rights might be the spawning ground for new ventures, sources of wealth, social welfare and employment. The article proposed 4 markets that meet these requirements including:

When compared to the US and Israel, Canada looks like a poor third cousin. What is the appropriate measure here? Investment as a percentage of GDP? Well we fall somewhere between New Zealand and Ireland. Maybe things aren’t as bad as we’d like to think. We have more venture money than New Zealand. We’re closer to a larger market. Maybe we should start to look at the positive factors and exploit the constraints to build opportunities.

Advanced economies

Sophisticated customers

Good universities

Strong intellectual property rights

Favorable tax laws

Vibrant entrepreneurial cultures

What’s an entrepreneur to do?

In my opinion, there are only 2 items on the above list that are directly impacted and influenced by entrepreneurs: Sophisticated customers; and Vibrant entrepreneurial cultures. Sure, the net result of a more positive entrepreneurial environment is a advanced economy that produces good universities. We can lobby politicians for strong intellectual property rights (and consumer freedoms) and favorable tax laws. But there are advocacy groups like the National Angel Capital Organization and the Canadian Venture Capital Association that more directly benefit and are better funded to act on the behalf of entrepreneurial financing. This is not some that necessarily deserve any additional attention than you currently dedicate to the political process. I’m arguing the entrepreneurs should build companies and leave this to the pundits, advocates, policy wonks and politicians.

Sophisticated customers

For entrepreneurs,we need to work on helping develop sophisticated customers. Often these customers are located near where the entrepreneur is building their product or service offering. However, this is not a requirement. Entrepreneur should look for sophisticated customers around the globe. Including customers in your product design and development process is key to creating products that meet customer needs and to develop more sophisticated customers. Steve Blank and Eric Reis have proposed the Customer Development Manifesto and Lean Startup as ways for founders to engage customers in the earliest work. All startups should read these posts.

But it is up to us to make noise. It’s up to us to build successful companies. It’s up to us to make Canada a better place for startups. No one is going to walk in and make it easier. We all have to participate and build a vibrant entrepreneurial culture. We need to talk about entrepreneurship as a career path. We need to talk to politicians about policy decisions.

So the first rule of being an entrepreneur is to reach out. Invite a friend. Make a connection. Tell a customer. Most of all, do the things that make the ecosystem better for you.

Related

David Crow focused on product design, customer development and go-to-market implementation on $0. He is available as a consultant. He is a mentor at UW VeloCity, Jolt and FounderFuel. Follow him on Twitter @davidcrow or at DavidCrow.ca

Published

David,
That’s a great analysis, and I applaud your unwavering optimism- you’re definitely a key start-up catalyst and shaker in this community.
But what I found lacking in the Canadian ecosystem, and we have to stop paying lip service to it-, is vibrant, aggressive and risk-taking VC’s that are willing to back emerging start-ups like in the US, early on. Either the new funds are dry, or the VC’s themselves are too cautious- and these 2 factors are recipes for stagnation. Startups are the lifeblood of the venture capital ecosystem.
We can make all the noise we want, but when it becomes easier to get US funding than bang your head against the wall in Canada, we all lose.
What will it take to get new VC funds, to see a change of attitude within VCs, to reach a new level of aggressiveness and risk-taking, and to raise the bar higher for all of us?
I’ll add that the answer is not with the government. I’m tired of hearing we need better/more government incentives or programs. That’s only a fraction of a factor. If the private sector cannot bootstrap itself without government help, then we have a big problem.

http://portal.eqentia.com William Mougayar

David,That's a great analysis, and I applaud your unwavering optimism- you're definitely a key start-up catalyst and shaker in this community. But what I found lacking in the Canadian ecosystem, and we have to stop paying lip service to it-, is vibrant, aggressive and risk-taking VC's that are willing to back emerging start-ups like in the US, early on. Either the new funds are dry, or the VC's themselves are too cautious- and these 2 factors are recipes for stagnation. Startups are the lifeblood of the venture capital ecosystem. We can make all the noise we want, but when it becomes easier to get US funding than bang your head against the wall in Canada, we all lose. What will it take to get new VC funds, to see a change of attitude within VCs, to reach a new level of aggressiveness and risk-taking, and to raise the bar higher for all of us? I'll add that the answer is not with the government. I'm tired of hearing we need better/more government incentives or programs. That's only a fraction of a factor. If the private sector cannot bootstrap itself without government help, then we have a big problem.

http://davidcrow.ca/ davidcrow

We can never be the US in terms of venture capital. The US venture capital system goes back to decisions make in 1970s regarding taxation, limited partnerships (fund structure), and along with significant market size. We will never be the US. We should stop comparing ourselves to the US. Our funds will look different because of our taxation, financial and corporate governance legislation.

Rather than focus on why we’re not like the US, we should be looking at the advantages that are uniquely Canadian. We have an incredible educational system. We have an incredible diversity of population. We have (at least for now) consumer friendly copyright. We have relatively strong intellectual property protections.

We have a gap in available moneys, i.e., there is $0-$100k; there is $100-$500k; there is $5M+. It feels like there is a gap in the $500k-$5M in funding. However, when I look at the Thomson Reuters data http://www.canadavc.com/ most of the deals that are reported are in the $500k-$5M. Just in reported Q1FY2009 reported deals included:

It would be great if there were more investments. This would mean that there is either more money that needs to get invested. Or just better ideas/companies/founders that need to get funded. I think the limited nature of available funding might speak to the conservative nature of our venture capitalists, it might also speak to a number of other factors including non fundable ideas/companies/entrepreneurs; a general downturn in the economy; a 10 year IRR that is resulting in a shake out by the LPs in the VC partner layer.

http://davidcrow.ca/ davidcrow

We can never be the US in terms of venture capital. The US venture capital system goes back to decisions make in 1970s regarding taxation, limited partnerships (fund structure), and along with significant market size. We will never be the US. We should stop comparing ourselves to the US. Our funds will look different because of our taxation, financial and corporate governance legislation.

Rather than focus on why we're not like the US, we should be looking at the advantages that are uniquely Canadian. We have an incredible educational system. We have an incredible diversity of population. We have (at least for now) consumer friendly copyright. We have relatively strong intellectual property protections.

We have a gap in available moneys, i.e., there is $0-$100k; there is $100-$500k; there is $5M+. It feels like there is a gap in the $500k-$5M in funding. However, when I look at the Thomson Reuters data http://www.canadavc.com/ most of the deals that are reported are in the $500k-$5M. Just in reported Q1FY2009 reported deals included:

It would be great if there were more investments. This would mean that there is either more money that needs to get invested. Or just better ideas/companies/founders that need to get funded. I think the limited nature of available funding might speak to the conservative nature of our venture capitalists, it might also speak to a number of other factors including non fundable ideas/companies/entrepreneurs; a general downturn in the economy; a 10 year IRR that is resulting in a shake out by the LPs in the VC partner layer.

http://engag.io/ William Mougayar

I didn’t mean to focus on the structural, historic or regulatory differences between the US and Canada, although I’ll go on a limb, and say that these are excuses today. And it’s definitely not the lack of good ideas/founders/companies.

The gap that exists (as you pointed out) is in the early stage cycle. The list of 6 deals in that bracket is a paltry accomplishment compared to what it should be.

I didn't mean to focus on the structural, historic or regulatory differences between the US and Canada, although I'll go on a limb, and say that these are excuses today. And it's definitely not the lack of good ideas/founders/companies.

The gap that exists (as you pointed out) is in the early stage cycle. The list of 6 deals in that bracket is a paltry accomplishment compared to what it should be.

I agree that “It would be great if there were more investments”, so what can we do as a community to help make that happen, and to help VC's become less conservative? We can't accept the status quo, and we have to keep expressing our disatisfaction with it and make it a major agenda item, and not a passing commentary. I like to see this conversation expand further to the community at large. A bit of it was started here: http://www.robhyndman.com/2009/09/29/help-us-cr…

http://davidcrow.ca/ davidcrow

Adding to my list of people doing great things and telling the Canadian story: